July has not brought necessarily good news to certain high tech and consumer electronic producers and their respective businesses focused on industry supply chains.

Business headlines have included Microsoft reporting its biggest quarterly loss ever, fueled by a nearly 5 percent decrease in revenues, as well as writing-off 80 percent of its $9.4 billion investment in Nokia’s handset business and the shedding of 6 percent of its global workforce. The providers cloud-based software businesses were up 88 percent from the year-earlier period but reflected a slowdown from prior 100 percent plus gains in prior quarters. Within Microsoft’s consumer hardware revenues, revenues for the Surface tablet nearly doubled to $888 million while sales of the XBox gaming console rose 27 percent, but both hardware lines could not generate enough margin to offset performance of the broader Consumer division.

Under pressure from an activist investor, Qualcomm, one of the largest producers of semiconductor ships utilized in mobile phones, is expected to conduct a strategic review that will explore a potential breakup of that company. Financial media speculates that a breakup would possibly involve a separation of chip production from its lucrative patent-licensing businesses.

Speaking of mobile devices, who would have envisioned that Apple’s latest quarterly performance that included a 35 percent increase in iPhone related revenues and a 38 percent boost in profits, would disappoint Wall Street. Our Supply Chain Matters Commentary will tell you why.

IBM reported its 13th consecutive quarter of revenue declines as this technology provider continues to reinvent itself in the light of the accelerating movements toward mobile and cloud based computing. In the latest June-ending quarter, revenue fell 13.5 percent and IBM reported year-over-year declines among nearly all of it major business lines. While its cloud-computing business has reached $8.7 billion in revenues, it was not enough to overcome shortfalls in other business units.

As Supply Chain Matters previously noted, Hewlett Packard remains in the final preparation stages in splitting into two separate corporate entities, one, Hewlett Packard Enterprise Company will oversee operations of the now HP Enterprise division. The other, HP Inc., will oversee operations of the now HP Printer and PC divisions. That split is scheduled to take effect on November 1st, with potential implications to individual supply chains and supporting software applications.

Other well-recognized names such as AMD, Cisco Systems, EMC, Intel and others have struggled with fast-changing shifts in customer technology needs and requirements along with the increasing impacts of mobile and cloud-based computing.

The lifeblood of high-tech and consumer electronics supply chains, and increasingly automotive supply chains, has been the semiconductor industry. Of-late, there has been a slew of acquisitions among key suppliers that will likely result in consolidation among a smaller group of global players. The San Jose Mercury Times recently observedthat “half a dozen chipmakers in Silicon Valley, including a few storied names, have changed hands in less than two years in nearly $12 billion in mergers and acquisitions affecting thousands of employees and costing some their jobs.” The latest was Intel’s acquisition of programmable chip producer Altera. Silicon Valley speculation is whether Qualcomm will be either be the next acquirer or the next target. This industry consolidation remains of great concern to industry supply chain senior operations and procurement executives.

One of the iconic Don Henley and Eagles tunes was “ A New York Minute”. Originally released in 1989, it features the following verse:

In a New York minute

Everything can change

In a New York minute

Things can get pretty strange

In a New York minute

Everything can change

In a New York minute

Thus is our observation of iconic players in high-tech and consumer electronics. The Third Wave of computing described by industry analyst firm IDC in 2013 has indeed made its sobering presence and the industry is changing at the pace of “A New York Minute”.

Events, change and uncertainty seem to be a constant, and that will continue to spill over into various supply chain related dimensions.

Late last week, the World Trade Organization (WTO) reached a landmark $1.3 trillion deal that addresses the categorization of 201 information technology products that will be freed from import tariffs. Among the products covered in this agreement are new-generation semi-conductors, GPS navigation systems, medical products which include magnetic resonance imaging machines, machine tools for manufacturing printed circuits, telecommunications satellites and touch screens. Once approved, the agreement will update an Information Technology Agreement that has not been updated for the past 18 years.

According to the WTO, the tentative accord reached by 54 of its members was confirmed as the basis for implementation work to begin. Ministers from the participating members will now work to conclude their implementation plans in time for the WTO’s 10th Ministerial Conference which will be held in Nairobi this December. Five of the total number of countries needed for final signoff has thus-far not signed up. Those countries include Colombia, Mauritius, Taiwan, Turkey and Thailand. The Director of WTO has indicated to news sources that approval from the remaining countries is due to process delays, and expects the required additional countries to sign-up soon.

This latest categorization is being billed as the first global tariff-cutting in 18 years with the implication that globally-based consumers should eventually benefit in purchases of computers, game consoles, touch-screen devices and other consumer electronics products. All 161 WTO members are expected to benefit from this agreement, as they will all enjoy duty-free market access in the markets of those members who are eliminating tariffs on these high tech products. According to the WTO, the terms of the agreement will be formally circulated to the full membership at a meeting of the WTO General Council on 28 July.

A published Reuters reportindicates that high-tech manufacturers General Electric, Intel, Microsoft, Nintendo and Texas Instruments are among those firms expected to benefit from the free-up tariffs. A U.S. trade representative indicated to Reuters that more than $100 billion in U.S. exports alone would be covered by the updated agreement.

The implication to hi-tech and consumer electronics industry supply chains is significant.

A considerable amount of new products and product categories have been added since these tariffs were originally created 18 years ago, and with over 200 products designated to be free of import tariffs and duty-free trade, the industry as a whole stands to benefit by increased global market access and more streamlined, direct flows to end markets. The notions of offshore and near-shore production as well as new opportunities for push-pull customer fulfillment strategies can well benefit from this development of tariff-free components and products. On the other hand, the competitive landscape of regional brands competing with global brands will magnify.

By our Supply Chain Matters lens, the agreement will have implications to current manufacturing sourcing of high-tech and consumer electronics products since the assumptions concerning added tariff costs will obviously change. Supply chain strategy teams should therefore plan on a refresh supply chain network design models in light of these tariff-free assumptions to uncover any new opportunities for more efficient or enhanced customer fulfillment focused manufacturing and sourcing of end-products.

After years of what is described as unproductive conversations, The American Apparel & Footwear Association recently publically called for major changes to Alibaba Group’s anti-counterfeiting procedures. AAFA represents more than 1,000 clothing, shoe, and lifestyle brands, and over the last four years, has been engaged in on-going conversations with Alibaba representatives on the problem of counterfeits on Alibaba’s Taobao online shopping site. According to the trade association, counterfeits across China cost clothing and shoe brands millions in lost sales, cause damage to reputation, and incur legal costs and an immense toll on internal resources.

In an open letter to Alibaba Executive Chairman Jack Ma, AAFA President and CEO Juanita Duggan called for a plan to address counterfeits that is more transparent and driven by certified brand owners. The proposed AAFA plan outlines four elements:

Easy brand certification

Brand-controlled “take-downs”

Brand approved sales

A transparent verification process

To add even more emphasis and probably more attention to ongoing apparel counterfeiting, singer Taylor Swift has taken up the cause. Readers will likely recall that Ms. Swift recently successfully confronted Apple with the issue of proper royalties within Apple’s new music streaming service during a subscribers free three-month trial.

According to a published report by The Wall Street Journal, the American pop star’s popularity in China has exploded and so has the availability of unauthorized products of all dimensions. In an attempt to control this surge of counterfeits, Ms. Swift is launching her own branded clothing line in early August among China’s two largest online players, JD.com and Alibaba. According to the report, the strategy is to leverage Swift’s star status to stem the selling of products that do not have proper rights to utilize the Taylor Swift name.

The availability of unauthorized counterfeit goods across China obviously continues. While industry associations such as the AAFA, along with respective brand owners themselves provide due-diligence, continued visibility and calls for action, the efforts of Taylor Swift might prove to be more meaningful. Alibaba, with enormous online fulfillment influence, perhaps now has an added incentive to stem the availability of unauthorized products.

Industry supply chain teams should applaud and support Taylor Swift’s entrance and response to this challenge.

Yesterday, after the stock market closed, Apple announced its fiscal third quarter financial performance and Wall Street’s headline was immediately one of disappointment. This was despite reporting that profits had surged 38 percent from the year earlier period along with total revenues that grew 33 percent. Gross margin was reported as a whopping 39.7 percent which is extraordinary for the majority of today’s consumer electronics providers. Yet within minutes of the earnings report, Apple’s shares plunged 7 percent in after-hours trading and today, dropped as low as 21 points before a small rebound.

What the investment community is primarily concerned with is a perception that Apple is trending toward a one-product company, that being the iPhone, which with the latest results, accounts for 63 percent of Apple’s overall sales. That is a ten percentage point increase from a year ago, prompting concerns that other products such as the iPad are declining in sales, while new products such as the Apple Watch have yet to provide an offset. Unit sales of the iPad are believed to have declined 18 percent in the latest quarter, making a sixth consecutive quarter of year-over-year declines. Once more, the previously touted partnership among Apple and IBM, designed to provide more business applications leveraging the Apple tablet, do not appear to be stemming the declining trend.

In the fiscal third quarter, while Apple reported shipping 47.5 million iPhones, an increase of 35 percent from the year earlier quarter, that number was 23 percent lower than shipped units reported for fiscal Q2. According to a report by The Wall Street Journal, analysts noted previous quarter-on-quarter iPhone volumes fell by 19 percent and 17 percent respectively, and remain concerned for a steeper rate of decline. Apple attributed unit shortfall to the lowering overall inventory by 600,000 units during the quarter. Fiscal Q3 has traditionally been Apple’s slowest volume quarter.

In an interview with the WSJ, CEO Tim Cook indicated that he refuses to accept the thinking that Apple cannot sustain its existing growth rates. He further indicated that Apple has pried open the door to untapped markets such as China, and that the company is sensing a larger conversion rate from Android powered devices to iPhone.

Apple did not provide any breakdown of Apple Watch performance but CEO Cook indicated to analysts that the “sell-through” of the Watch was better than the iPad and iPhone at their product introduction phases. We will have to wait and observe what that means over the next two critical quarters.

Planners are obviously reducing existing model inventories but must be diligent to not impact Apple fiscal Q4 results. With expectations for increased sales of the Watch, as well as a newly introduced iPod Nano, additional effort will be focused on ramp-up production milestones. An added challenge has got to be focused on what to plan for inventory and fulfillment needs for the iPad, given that there may well be a product change coming.

And then there is that mega “elephant in the room”, what to do with $200 plus billion in cash.

The adage for Apple’s and indeed many other global supply chain teams is often, not what you did yesterday, but what are you going to do tomorrow, next month, and next quarter.

Last Wednesday, in a noteworthy effort to spur widespread additional interest and new subscribers within its Prime buying program, Amazon declared its inaugural Prime Day, offering its online Prime program customers Black Friday like pricing deals in the middle of July.

The date was chosen because it represented the 20th anniversary of Amazon. The significance of a compelling holiday like online buying event in July was more important. Amid a flurry of anticipation as well as competitor response, Prime Day ended up having a mixed online fulfillment response. From our Supply Chain Matters lens, in spite of large-scale marketing driven promotional efforts, the event looked to be more of an inventory clearance event than one that would add a new dimension to Christmas in July in online fulfillment.

Online consumers did respond but had mostly a mixed reaction with the #PrimeDay hashtag garnering mostly disappointment or cynical commentary regarding the lack of compelling product offerings and/or deals. Some noted slower web site response time. Bargains on high-profile items such as Amazon’s Fire TV stick or the Amazon Kindle HD sold-out rather quickly, reverting to an unspecified wait list. The hashtag of #HappyPrimeDay turned instead to #CrappyPrimeDay for some. Product selection turned out to be more generalized and included apparel, household and other every-day type items. That prompted our declaration that from our supply chain lens, the reality of Prime Day looked more to be one of a July inventory clearance event.

Online sales tracker ChannelAdvisor reported that by Noon, Amazon’s U.S. same-store sales were about 80 percent ahead of volumes the prior July 15th. During the day, Amazon’s marketing types were hyping numbers to business channel CNBC regarding one-day sales records. However, the network could not avoid overlooking the mixed reviews streaming across social media. We tested bargains and selection at around 10am Eastern and found few compelling bargains to be garnered but rather pointers to every-day selection categories and pricing.

An Amazon press release on Friday declared a headline that the online retailer sold more units on Prime Day than that of Black Friday 2014. Worldwide order growth increased 18 percent more than Black Friday of 2014. Customers reportedly ordered 34.4 million items among Prime eligible countries. Readers should recall, however, that 2014 Black Friday sales were reported by the National Retail Federation as 11 percent below that of 2013 with shoppers spending upwards of 6.4 percent less. In 2014, shoppers opted for last-minute deals.

Various sales and operations and supply chain planning teams will appreciate the impact and pain level of such one-day order volume spikes, especially when planning is based on past online order history likely had to scramble to fulfill such demand. It is literally a huge gamble to position such inventory for any single customer, albeit Amazon and Wal-Mart.

Other teams are more likely in the midst of assessing whether Amazon’s demand needs impacted other key customer needs, or whether such spiked July demand will have a substantial impact to the forthcoming three months of B2C channel fulfillment sales.

The build-up to Prime Day definitely caught the attention of other retailers, particularly Wal-Mart, which quickly marshalled a series of product promotions designed to both offer a lower-cost membership program as well as compelling deals on Wal-Mart.com. Reports indicated that Wal-Mart.com encountered greater interruptions and slower response times as online consumers checked for matching or better deals. None the less, Wal-Mart was quick to declare its counter-attack to be an online success, as well as the largest day for same-day pickup at a retail store.

Amazon declares that Prime Day will now be an ongoing annual event.

Like any new online fulfillment program, a lot can be garnered from results of the inaugural event. While Amazon’s line-of-business and marketing teams can declare victory, it is the online consumer that has the ultimate final vote as to the attraction and success of an online event.

In June, The United States House of Representatives voted to repeal country-of-origin labeling (COOL) for beef, pork, and chicken and social media commentary regarding the move continues to dominate as an ongoing trending topic. The reasons are obvious- consumers demand and expect knowledge as to the specific sourcing origins of food products. Consumers are right to be concerned and watchful, and the impact of these actions continue to impact food, beverage and consumer product goods focused supply chains.

The original COOL legislation had good intent, requiring meat products sold in supermarkets and grocery stores to specifically indicate where the animal was born, raised and slaughtered. Reports indicate that the original law was prompted by the lobbying of U.S. ranchers who compete with the Canadian cattle industry, and later garnered the interest of consumer watchdog interests.

But this current ongoing process now involves the political and economic implications of other supply chains, in addition to food.

The broader issue involves the World Trade Organization (WTO) which after the initial U.S. legislation was passed, ruled that the labels regarding animal origin would have a discriminatory impact against the two U.S. border countries, Canada and Mexico, and thus a barrier to free trade. Both border countries indicate that the law requires that animals be segregated by country of origin, a costly process that has U.S. wholesale buyers avoiding the buying of export origin meat products.

Both countries are seeking permission to impose what is described as billions of dollars in added tariffs on U.S. goods in retaliation. And there lies the supply chain impact which threatens to change the existing economics and stakeholder interests of cross-border trade.

U.S. legislators are thus caught in what is described as a damned if you do, or damned if you do not conundrum regarding the existing COOL repeal legislation which has now moved to the U.S. Senate for consideration.

In order to seek additional insights regarding the implications of COOL, Supply Chain Matters had the opportunity to recently speak with Candace Sider, vice-president of regulatory affairs, Canada, at international trade compliance services provider Livingston International. Ms. Sider has a significant background in understanding Canada’s regulatory processes involving interaction with federal and provincial officials, regulatory agencies and policymakers.

She explained that Canada viewed the original U.S. COOL labeling requirements as having a $3 billion impact on that country’s cattle and hog industry. During the current arbitration period, decisions are expected to be made as to what commodities would remain on the original impacted list. If the surtax were to be implemented, importation from the U.S. of the subject products could ultimately passed on to consumers. The U.S. government has indicated to the WTO that it disputes Canada’s figures. However, Canada is preparing to lift tariffs on U.S. imports that include in excess of 100 different commodities including products such as range and refrigerator parts, wine, and yes, chocolates.

The WTO is not expected to rule on the U.S.’s latest appeal to the threatened tariff increases until early August, or possibly September. Meanwhile, the implication of the ongoing dispute actually impacts more than just meat-focused supply chains.

Livingston is currently advising its clients to prepare for a number of potential scenarios involving the ongoing trade dispute process invoked by COOL.

Where all of this eventually ends-up is subject to many viewpoints. After all, this is very much a process driven by economic, multi-industry and lobbyist forces.

However, one aspect is clear. The complexity of today’s globally based supply chains takes on many different dimensions and implications. While you might have perceived that legislation affecting packaging disclosure of meat products has little to do with service parts, chocolates and wine, it indeed does. The takeaway is to nurture contacts and resources that can alert your team to ever changing developments and multi-industry implications.